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Editorial

Antitrust Law Aspects in Ukraine

Ukraine, like other European countries, developing a market economy on their territory, has incorporated antitrust regulations and legal mechanisms in its legislation to regulate and support competition, as well as rules to ensure fair competition. An integral part of the competition control is the control exercised by the Antimonopoly Committee of Ukraine over M&A transactions both in Ukraine and abroad, which may also affect Ukrainian domestic markets.

Concentrations

Pursuant to Article 22 of Law of Ukraine On the Protection of Economic Competition of 11 January 2001 (hereinafter referred to as the “Competition Law“), the following shall be considered as concentration:

  1.     merger of economic entities (all the assets and liabilities of the merging companies are transferred to the new company);
  2.     affiliation of an economic entity to another entity (an economic entity acquires all the assets and liabilities of another company);
  3.     acquisition of control;
  4.    acquisition of control directly or through other persons over one or several economic entities or over parts of economic entities by one or several economic entities, in particular by means of:

    assets, i.e.:

  •         direct or indirect acquisition of assets in the form of an integrated property complex or a structural subdivision of an economic entity; conclusion of rental, leasing and concession agreements;
  •          acquisition of the right to use assets in the form of an integrated property complex or a structural subdivision of an economic entity;
  •          acquisition by other means, in particular the purchase of assets of a liquidated economic entity;

b)    appointment to key positions, i.e.:

·         appointment or election of a person – occupying one or several positions of a chairman, deputy chairman of the supervisory board, the board of directors or the mentioned positions at other supervisory or executive boards, e.g. directorate, of other economic entities – as a chairman, deputy chairman of the supervisory board, the board of directors or of other supervisory or executive boards of the economic entity;

·creation of a situation where there is the coincidence of more than half of the members of the supervisory board, the board of directors, other executive or supervisory boards of two or more than two economic entities;

establishment of an economic entity by two or more than two economic entities that will independently carry out economic activities in the long run, whereas the mentioned formation does not result in the co-ordination of competition behavior between economic entities, having established the economic entity or between them and the newly-established economic entity;

·        direct or indirect purchase or acquisition (by other means) of the right to use shares (stock), which ensures attaining or exceeding 25 or 50% of the votes at the higher management board of the relevant economic entity.

Which transactions are subject to prior approval by the Ukrainian antitrust authorities?

A concentration is notifiable and requires a prior approval of the Antimonopoly Committee of Ukraine where the following assets and/or turnover thresholds are exceeded by the companies involved.

In the Ukrainian competition law, the above-mentioned situations are considered as economic concentration which may affect competition. Economic concentrations are subject to a prior approval by the Antimonopoly Committee of Ukraine. The thresholds set out in Article 24 of the Competition Law are met in the following cases:

I) (1) if the total cost of assets or the total sales of the participants in concentration, with relations of control being taken into account, in the last financial year, including those abroad, exceed the sum equivalent to EUR 30 million while (2) the assets or the sales of at least two participants in concentration, with relations of control being taken into account, exceed the sum equivalent to EUR 4 million;

II) the sales, in Ukraine only, of at least one participant in concentration, with relations of control being taken into account, in the last financial year (1) exceed the sum equivalent to EUR 8 million while (2) the assets, both in Ukraine and/or abroad, of another participant in concentration, with relations of control being taken into account, in the last financial year exceed the sum equivalent to EUR 150 million.

Who is considered to be a participant in concentration?

Pursuant to Article 23 of the Competition Law, the following shall be considered as participants in concentration:

  • economic entities with respect to which a merger or affiliation is being carried out;
  • economic entities which acquire or intend to acquire control over another economic entity, as well as economic entities with respect to which control is being acquired or must be acquired;
  • economic entities whose assets (property), shares (stock) are being acquired (as property) or received for use, lease, leasing or concession and their buyers (acquirers);
  • economic entities which are or intend to be the founders of a newly-established economic entity. An economic entity whose assets (property) or shares (stock) are contributed to the share capital of the newly-established economic entity shall also be considered as a participant in concentration where one of the founders is a body of executive power, a body of local self-government, a body of administrative and economic management and control;
  • individuals and legal entities linked with the aforesaid participants in concentration by relations of control, which gives grounds to consider these individuals and legal entities and the relevant participants in concentration as a corporate group.

Prohibition of Concentrations

Concentrations may be not authorized by the Antimonopoly Committee only in the following cases:

  • a concentration results in the market monopolization,
  • a concentration results in the monopolization of a market significant part,
  • a concentration results in the substantial restriction of competition on the whole market,
  • a concentration results in the substantial restriction of competition in a market significant part.

If the Antimonopoly Committee prohibits the concentration, the participants in concentration may still apply for a ministerial approval.

Sanctions for failure to notify

If a transaction that is subject to merger control is not notified to the Antimonopoly Committee, it shall be automatically considered a competition law violation. If the Antimonopoly Committee finds out, it may impose fines on the purchaser. The implementation of a transaction that is subject to merger control without the relevant authorization by the Antimonopoly Committee may entail a fine of up to 5% of the participant/company turnover, with relations of control being taken into account, in the last financial year preceding the year when such an authorization should have been applied for.

If the company did not make any sales in the last financial year or if it does not provide information about the performance per request of the Antimonopoly Committee, the latter may impose a fine of up to 20,000 tax-deductible minimum citizen incomes (UAH 340,000, equivalent to approx. EUR 12,000).

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